Global Investment Prospects within the GCC

Threats are slanted to the downside. In the occasion of an extended conflict, the present effect on the area will be compoundedthrough elevated energy and food prices, declining trade, tourism and remittances, increased financial pressures, and displacement. "The current crisis is a plain suggestion of the work ahead for the area: not only to weather shocks, however to restore more resilient economies with more powerful macroeconomic principles, innovate and enhance governance, invest in infrastructure, and improve employment-creating sectors," said.

With peace and the ideal action, countries can develop the organizations, abilities and competitive sectors that develop chances for people." With this long-lasting vision in mind, the report takes a close look at the area's potential for industrial policy government actions to increase strategic service activity as a chauffeur of economic development and task creation.

ANSR July GCC PRs 50DR+

Federal governments in the area have adopted commercial policy at a high rate in the last years, typically through sovereign wealth funds and state-owned enterprises, but the results have actually been blended. The report highlights the vital requirement for strong organizations and mindful targeting of policies. "As countries face the heavy toll of the present conflict, it is very important to also not lose sight of the work needed for long-lasting peace and success," stated.

Upcoming Regional Financial Forecasts

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial forecast for the area prepared directly for the financing profession. The GCC economy faces a marked contraction this year pending information of the US-Iran contract to end the war. We expect energy flows, tourist and financier sentiment to slowly normalise as war interruptions subside.

ANSR July GCC PRs 50DR+

The interim contract in between the US and Iran is a substantial action towards reaching a full-blown deal. A complete go back to normality in the Strait of Hormuz will likely take time, but the danger of a recession-inducing oil cost spike has declined. Worldwide GDP is expected to grow by 2.4% this year, 0.2 ppt less than we forecasted three months earlier, and 3.1% in 2027.

We forecast a 4.1% contraction in Middle East GDP this year (versus projected 3.6% expansion before the war), higher than the decrease in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stick out as the hardest hit, owing to their failure to prevent the disruption to regional shipping, war-driven infrastructure damage and tourist losses.

Our 2026 outlook for the GCC is weaker than three months ago, with GDP projection to contract by 2.4% compared to a 0.2% decline predicted previously. We expect Oman and Saudi Arabia to be the least adversely impacted by the fallout from the conflict, with both economies continuing to expand this year.

The financial damage incurred in the last couple of months is significant. Saudi GDP data for Q1 revealed growth slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest rate because the Covid pandemic. On a seasonally adjusted basis, GDP contracted 1.2% q/q, driven by a 6.8% fall in oil activities as the Strait of Hormuz disruption struck late in the quarter.

Essential Industrial Shifts for 2026

Aside from Oman, all GCC manufacturers along with Iran and Iraq have suffered substantial oil and gas production losses considering that the start of the dispute. May data reveal regional production nearly halved from pre-war levels, with the decrease deepening relative to March and April. Rerouting efforts, including by Saudi Arabia through the East-West Pipeline and the UAE through the Habshan-Fujairah pipeline, have actually assisted prevent an even bigger plunge in output.

ANSR July GCC PRs 50DR+

However, we forecast GCC oil sector output to contract by 14.5% this year, which will mark the steepest decline in a number of years. We then expect a 23.5% rebound next year, driven mostly by normalisation from a severely depressed base. Meanwhile, oil costs have been volatile, easing listed below $85 per barrel as the interim agreement was revealed.

In the medium term, we anticipate oil costs to be a little lower than our pre-war standard, as the UAE's departure from OPEC+ enables for a progressive increase in its output towards the 5mn barrel daily production target as soon as trade normalises. Versus this background, the UAE will accelerate the building of a brand-new West-East pipeline that ought to double the capability of export through Fujairah.

The May PMI surveys reported output growth reaching its strongest level in 3 months, driven largely by enhanced domestic demand. They remain below long-run averages, with weak export orders and price pressures from greater product and transportation expenses are a common theme. Overall, we expect a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% growth pre-war) and a steady recovery over the rest of the decade.